DraftKings Drops Prediction Market App
Title: DraftKings Steps Back from Prediction Markets After NFA Application Withdrawal
Posted: April 18, 2025, 01:36 h
Last Updated: April 18, 2025, 08:49 h
Author: Todd Shriber, aka etfgodfather
Categories: Financial, Gaming Business, Mergers and Acquisitions
Synopsis: The gaming titan, DraftKings, has decided to abandon its plan to enter the prediction markets scene by withdrawing its application for membership with the National Futures Association (NFA). The decision comes amidst growing legal challenges and potential regulatory complications.
DraftKings, the megastar in the sportsbook and internet casino industry, has significantly altered its strategy after withdrawing an application that would have granted it entry into the cut-throat prediction markets space. Initially filed last July, the application, for a prospective entity called "DraftKings Predict," aimed to rival prediction market giants such as Kalshi and PredictIt.
However, the Boston-based heavyweight succumbed to the pressures of regulatory challenges and withdrew its application in March. Coincidentally, a representative from DraftKings revealed to Covers on Wednesday that the company is still observing the prediction markets landscape—an emerging product that captivates ever-evolving consumer engagement.
The NFA previously considered DraftKings as a pending member, with the filing made by Gus II LLC, which shares a DraftKings address and phone number. Notably, the filing included the names of co-founder and CEO Jason Robins, as well as plans for co-founder Paul Liberman to serve as the CEO of DraftKings Predict.
Flirting with Prediction Markets
As experts probe the prediction markets, it's worth noting that these platforms are under the regulatory aegis of the Commodity Futures Trading Commission (CFTC). In most cases, member firms of the CFTC are also mandated to register with the NFA.
That said, intriguingly, Kalshi—the bellwether in the prediction markets landscape—isn't an NFA member firm. Previously, Robins hinted that DraftKings was closely following the prediction markets' evolution, potentially signaling some degree of interest in the sector.
The specific reasons for DraftKings' withdrawal of its NFA application remain unclear. However, it's plausible that regulatory concerns played a significant role in the decision. DraftKings and its peers operate under state regulation, whereas Kalshi and other prediction market operators fall under the jurisdiction of the CFTC—a federal entity.
Another possible cause of DraftKings' retreat from the prediction markets arena could be the intensifying legal challenges faced by Kalshi. Numerous states have pronounced Kalshi ineligible to offer sports event contracts within their jurisdictions, despite the company's operation in most states where DraftKings has established its sports betting presence.
Serendipitous Timing
Over the past few days, Kalshi introduced derivatives for Major League Baseball (MLB) games, reigniting debate among critics as to whether the company is functioning as a sportsbook. Notably, DraftKings' withdrawal announcement coincides with a surge in chatter from analysts acknowledging that while prediction markets pose a significant competitive threat to online sports betting, the two industries are likely to coexist in the future.
Some industry observers believe that sportsbook operators could even harness prediction markets to their advantage by mitigating tax pressures in some states and potentially gaining entry to other lucrative jurisdictions that currently prohibit sports betting.
[1] "Prediction Markets and Sports Gambling: A Growing Trend and Regulatory Challenges," Legal Sports Report, accessed April 18, 2025
[2] "DraftKings' Prediction Market Play Could Shake Up the Online Wagering Landscape," America's Line, accessed April 18, 2025
- DraftKings, the sportsbook and internet casino industry leader, has stepped back from its plan to enter the prediction markets scene, following the withdrawal of its application with the National Futures Association (NFA).
- The decision to abandon the prospective entity, DraftKings Predict, was influenced by regulatory challenges and potential complications, as DraftKings operates under state regulation while prediction market operators such as Kalshi fall under the jurisdiction of the federal Commodity Futures Trading Commission (CFTC).
- Futures expansion through acquisitions may still be on the table for DraftKings, as a representative revealed that the company is still observing the prediction markets landscape.
- Dkng, without explicitly venturing into prediction markets, could potentially leverage prediction markets in the future to gain entry to jurisdictions that currently prohibit sports betting and reduce tax pressures in some states.
